China yuan touches 19-year high, nears limit of band

The yuan touched its highest level since 1993, nearing the strong end of the trading range allowed by the central bank, on speculation policy makers will take more steps to counter a slowdown in the U.S., the world’s largest economy.

Financial markets opened today after a weeklong holiday, during which the Chinese Communist Party said its 18th congress will start Nov. 8. The event, which this year will feature a once-a-decade handover of power to a new generation of leaders, could result in increased stimulus to counter an economic slowdown, according to research notes last week from Mizuho Securities Asia Ltd. and Australian & New Zealand Banking Group Ltd. The U.S. jobless rate dropped to 7.8 percent in September, the lowest level since January 2009, data showed Oct. 5.

“The Congress date signals that political issues have been set aside and the leaders will focus on reviving the economy,” said Daniel Chan, executive vice president at Glory Sky Global Markets Ltd. in Hong Kong. “The U.S. data are encouraging for Chinese exports, which also supports the yuan.”

The yuan climbed to 6.2812 per dollar, the strongest level since China unified official and market exchange rates at the end of 1993, before closing 0.04 percent lower at 6.2872, according to the China Foreign Exchange Trade System. Today’s high exceeded the central bank’s reference rate by a record 0.98 percent, near to the maximum 1 percent divergence that is permitted.

The People’s Bank of China lowered its daily fixing by 0.03 percent today to 6.3426 per dollar. That was 0.9 percent weaker than the closing spot price on Sept. 28.

China’s yuan positions may have fallen in September while the nation faces “more severe” imported inflationary pressure after Europe, U.S. and Japan expanded quantitative easing, the People’s Bank of China’s publication Financial News said in a front-page commentary today.